Analysis by Willis Towers Watson finds the current formula is causing higher premium rates, reduced competition and poor value for consumers
LONDON, Thursday 16 March, 2017 — Willis Towers Watson has responded to a European Insurance and Occupational Pensions Authority (EIOPA) Discussion Paper on the upcoming review of Solvency II, where it has identified significant flaws in the formula used to calculate the risk margin and recommended a fundamental review of its methodology and calibration.
Kamran Foroughi, Director at Willis Towers Watson, said: “We believe the high level of risk margin currently attached to long-term insurance products is resulting in higher premium rates and reduced competition, leading to worse value for consumers.”
Willis Towers Watson’s submission notes that the risk margin has become a much more material component of insurers’ balance sheets, leading to a number of challenges and changes in business practice, including:
• Asset Liability Matching. Insurers’ ALM challenges related to risk margin have been exacerbated by falling interest rates.
• Risk transfer. The bigger the risk margin relative to the rest of the technical provisions, the more insurers are incentivised to offload risk to reduce the risk margin.
This can be done via reinsurance to a company outside the EU which is not bound by Solvency II rules. Continue reading Flawed Solvency II risk margin is hurting consumers
Insurers say they are encouraged by the most recent developments in the covered re/insurance agreement negotiations between the United States and European Commission.
Following the latest round of the talks, held Sept. 21-22 in Washington, D.C., the United States and European Union released a joint statement citing progress.
“Both sides continued to discuss in good faith matters relating to group supervision, exchange of confidential information between supervisory authorities on both sides, and reinsurance supervision, including collateral,” the joint statement said.
Continue Reading “Insurers Encouraged by Latest Round of Covered Agreement Talks” at Insurance Journal
London, 23 September 2016 — Moody’s Investors Service has today upgraded SCOR SE’s insurance financial strength rating to Aa3 from A1 and its subordinated debt rating to A2(hyb) from A3(hyb).
The outlook is stable. Moody’s also upgraded the ratings of various SCOR SE subsidiaries.
A list of all ratings affected by this rating action is available at the end of this press release.
SCOR SE (“SCOR“) is one of the largest global reinsurance groups. It reported gross premiums written of EUR13.4 billion in 2015 and shareholders’ equity of EUR6.4 billion as of 31 December 2015.
Continue Reading “Moody’s upgrades SCOR’s insurance financial strength rating to Aa3; stable outlook” at Moody’s
IVASS, the Italian insurance regulator, recently approved IVASS Regulation 28 of July 26 2016 on the look-through approach to determine the solvency capital requirements of insurers in the context of:
Under the standard formula, the solvency capital requirement will be determined by applying the look-through approach to collective investment schemes consisting of undertakings for collective…
Continue Reading “IVASS approves look-through approach to determine solvency capital requirements” at International Law Office News
Germany: Solvency II: BaFin provides interpretative decision on some aspects regarding the conduct of reinsurance business in Germany by insurance undertakings situated in third countries
In the past, the German Federal Financial Supervisory Authority (BaFin) published guidance on its web pages concerning correspondence insurance in the reinsurance sector (see RegZone report of 15 August 2016).
Following this guidance, on 30 August 2016 BaFin has issued an official interpretive decision on some aspects regarding the conduct of reinsurance business in Germany by insurance undertakings situated in a third country, which clarifies the earlier guidance.
Continue Reading “Germany: reinsurance business by third country firms” at Lexology
A new business relationship with Britain in the wake of its vote to leave the EU is “critical”, an island business leader said yesterday.
Bradley Kading, president and executive director of the Association of Bermuda Insurers and Reinsurers, said the island needed a twin pillar approach to Britain and the EU to ensure business did not suffer as a result of Brexit.
Mr Kading said that the EU was the second most important insurance market for ABIR members after North America.
He added: “Because Europe is such an important market to us, Bermuda has acted to win Solvency II equivalence, engage with critical International Association of Insurance Supervisors regulatory work streams, enact Organisation for Economic Cooperation and Development tax transparency, co-operation and enforcement rules and build relationships with key EU officials and key jurisdictional insurance supervisors.
Continue Reading “Twin pillar approach urged after Brexit vote” at The Royal Gazette
Regulators from the European Union and United States met in Brussels this week to continue talks on aligning their insurance regulations amid growing concerns from a key U.S. industry group that says implementing the new rules will hurt their members doing business in Europe.
A joint EU-U.S. statement that the Treasury Department released Thursday said talks took place on July 25 and July 26 for a “covered agreement” on insurance and reinsurance issues.
The two economies are holding the talks, authorized by the 2010 Dodd-Frank Act, in large part because of a new EU regulation that establishes rules on reinsurance supervision and collateral requirements.
The substantive issues negotiators discussed were identical to the last round of talks in May, and they included reinsurance collateral.
Continue reading “Transatlantic Insurance Talks Continue as U.S. Industry Signals Frustration With EU” at Morning Consult News
Under the PRA’s Solvency II-implementing rules, (re)insurers are required1 to publish an annual Solvency & Financial Condition Report (SFCR), which describes:
- the (re)insurer’s business and performance;
- the (re)insurer’s system of governance, and an assessment of its adequacy;
- (on a risk-category by category basis), the risk exposure, concentration, mitigation and sensitivity;
- the bases and methods used to value the (re)insurer’s assets, technical provisions, and other liabilities, together with an explanation of any major differences in the bases and methods used for their valuation in the (re)insurer’s financial statements;
Continue Reading “Solvency II: external audit of the Solvency & Financial Condition Report” at Lexology
The EU Solvency II Directive (2009/138/EC) was transposed into domestic Irish law by the European Union (Insurance and Reinsurance) Regulations 2015.(1)
The Solvency II regime provides welcome clarity regarding the functions that an insurer may outsource and the requirements which must be complied with before outsourcing.
This is particularly welcome news for those insurers which rely heavily on outsource service providers.
Where a critical or important function or activity is being outsourced, prior notification must be made to the Central Bank in a timely manner (at least six weeks before the outsourcing is due to come into effect).
Continue Reading “Outsourcing under EU Solvency II regime” at International Law Office